“They’re using what they’re good at doing–their part of the value chain–and generating more revenue off the same set of fixed costs, which is a good thing,â€ says Greenhalgh.
Greenhalgh says the sooner small businesses know their position in the value chain, the sooner they can function optimally within it. For Wildchild, the chain starts with cotton, which gets made into thread and then fabric to produce the clothes. But Wildchild’s position isn’t manifested until their design is placed on the product, and that’s also when value is added.
“Wildchild is in the design business,â€ says Greenhalgh, who is also the director of executive programs for minority- and women-owned businesses at Dartmouth. “I don’t care what industry you’re in, you need to understand what the whole value chain is about, which customers are willing to give you a high margin. And ask yourself, ‘What value am I contributing? Where do I want to be in this value chain? Where is the money?’â€
Chain of Command
It’s one thing to know your place in the value chain and another to know when it’s time to expand. Wildchild watched the industry wane as the recession took hold, limiting funds and resources. Threader is considered a counterstrategy, but with a lack ofÂ expert guidance and capital, a small business like Wildchild may have done itself more harm than good.
“A lot of businesses want to be able to capitalize on the opportunities that come their way once they get to a certain point, but sometimes you really shouldn’t,â€ says Maisha Walker, founder and president of Message Medium (www.messagemedium.com), a marketing firm in New York City that helps small businesses increase their exposure through the Internet. “You’re facing those challenges because you’re spreading yourself too thin. Most times in these organizations, it’s not so much a resource problem as it is a strategy problem.â€ Walker suggests Copeland, David, and Keflezgy choose between the two, leaving one for investors to independently run or to sell off for capital.
Jerome Edmondson, senior partner of the Atlanta-based small business consulting and development firm Edmondson Associates (www.edmondsonassociaties.com) and author of Maximizing Misfortune (Destiny Image Publishers; $15.99), agrees. With little to no time to market, search for capital, or seek investment opportunities, a company attaching itself to another business process before the initial one is solidly established is a “recipe for failure,â€ he says.
Threader generates some revenues, but not nearly enough to justify the hours that Copeland, Keflezgy, and David, along with two other full-time employees, put in to run both ventures (the trio puts in more than 70 hours per week each). All three realize that one staff juggling two businesses isn’t ideal, and believe the solution is an injection of capital so they can hire more people and amp up inventory. Keflezgy explains: “Funding is the necessary next step in the evolution of Wildchild and a critical one.â€